Association health plan rule poses financial threat for providers

Several hospitals and clinician groups have warned the federal government that uncompensated-care costs could soar if the U.S. Labor Department finalizes a rule that would allow more small businesses and self-employed workers to band together to buy insurance via association health plans.

The proposed rule, which grew out of an executive order issued in October, would broaden the definition of an employer under the Employee Retirement Income Security Act of 1974, or ERISA, to allow more groups to form association health plans and bypass ACA rules. ERISA is the federal law that governs health benefits and retirement plans offered by large employers. Comments were due Tuesday on the proposal.

Groups representing clinicians and hospitals have slammed both this rule and a similar proposal to expand access to short-term plans, as neither coverage type must comply with ACA standards that protect against discrimination for pre-existing conditions and requirements that they cover 10 essential health benefits.

However, they note association health plans pose a unique threat to providers because they have a history of fraud spanning decades and the proposed regulation doesn't seem to strengthen oversight of such plans adequately, according to the American Heart Association. The courts are littered with lawsuits filed by both patients and their employers over unpaid medical bills.

"Many plans collected premiums for health insurance coverage that did not exist," Dr. John Warner, president of the American Heart Association said in a comment letter dated March 5. "Some plans did not pay medical claims, leaving businesses, individuals, and providers exposed to millions of dollars in unpaid bills."

The American Medical Association fears such fraud could both continue and worsen as the proposed rule contained a passage that there would be "limited" effect on state regulation of association health plans if the rule were finalized. That passage raised questions from providers over whether states would maintain the ability to impose their own coverage standards on such plans.

"Fraudsters prey upon areas of regulatory ambiguity and may challenge such authority in courts to further delay enforcement, which allows more time to increase unpaid medical claims," Dr. James Madara, CEO of the AMA, said in a comment. "Without proper oversight to account for insolvency and fraud, AHPs have the potential to … (threaten) patients' health and financial security and the financial stability of physician practices and other providers."

Should the Department of Labor finalize the rule, AMA wants association health plans to provide participants explicit notice of what the plans cover. The association also asked the agency to provide a clear statement on states' enforcement authority over the plans.

America's Essential Hospitals also worries patients may not realize that such plans don't cover the breadth of services or have the same networks as ACA-compliant plans and come to safety-net hospitals for services that are no longer covered by their insurance.

As many as 4.3 million people are projected to leave the individual and small group insurance markets to enroll in association health plans over the next five years if the Trump administration's proposal to expand those plans is finalized, according to Avalere.